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The Force Awakens!
By: Allan L. Reagan, CEO
This newsletter comes to you in the midst of the record-breaking run of the latest installment in the Star Wars franchise, and the first under Disney’s auspices. 2015 was a good year to be in the movie exhibition business and 2016 is shaping up to be solid as well.
 We first exhibited Star Wars: The Force Awakens on the anniversary of opening Flix Brewhouse Des Moines. A year ago at that December 2014 opening, the company had just grown to 14 screens and was still operating its legacy restaurant HomeField Grill, having recently sold its other casual dining outpost, a Tilted Kilt Pub & Eatery in Texas.
For Flix, 2015 was a year of solid accomplishments, but it also brought into focus specific areas of opportunity and growth for the company. Highlights included:
| January |
American Sniper outperforms at the box office, especially in cinema-dining. After a dismal 2014, the industry is off to a robust start. |
| February |
New Des Moines store hits an all-time single day Flix Brewhouse record of 3,406 admits on Valentine’s Day – Fifty Shades of Grey. |
| February |
Definitive letter of intent executed for new Flix Brewhouse location in Sugar Land TX (suburban Houston). |
| April |
New prototype Flix Brewhouse opens in suburban Indianapolis IN. |
| May |
Definitive letter of intent executed for new Flix Brewhouse location in Albuquerque NM. |
| June |
Jurassic World opens, sets all-time domestic box office records. |
| September |
Flix Brewhouse (Carmel) takes a coveted Silver Medal at the Great American Beer Festival in Denver for brewer Chris Knott’s “Generation Alt” German altbier. |
| October |
Definitive letter of intent executed for new Flix Brewhouse location in Madison WI – Landlord is the 7th largest retail owner in the U.S. |
| October |
Film management agreement with Galaxy Theatres ends October 29th and a new film buyer, Cinema Service, begins October 30 with lower fees and greater availability of content. |
| November |
$2 million Round Rock expansion from six to nine screens opens, with immediate positive revenue results. |
| November |
After an 18-month development period, our feature-rich loyalty program, “the Circle,” debuts with 6,200 members joining in 21 days. |
| December |
Full on-line ticketing via the Fandango channel goes live for all Flix locations (not previously available through Galaxy). |
| December |
Flix introduces E-Gift cards, and sales of both E-Gift cards and conventional cards significantly exceed expectations. |
| December |
The Force Awakens and box office records again are shattered. |
Flix ended 2015 with 25 screens operating and 24 more in the committed pipeline.
But there were also growing pains. An area of major disappointment in 2015 was that the unit level management teams really struggled to deliver our standard guest experience (GX) while meeting cinema-dining industry norms in staff hours expended. For three quarters of the year company-wide, our units significantly underperformed in either GX scores or payroll costs or sometimes both. The fourth quarter, however, showed improvement, largely as a result of both normal learning curves and more intense direction from the corporate level, but these issues won’t be truly fixed until our unit teams can operate sustainably without constant micromanagement.
We have the right corporate leadership talent to get the job done in the field, but it will take tenacious attention to detail and tireless repetition for unit management teams to learn new skills and habits. Accordingly, in order to laser focus on reducing both GX non-compliance rates and unit payroll costs, we’ve provisionally slackened the pace in connection with the development of both unannounced new stores and planned point of sale system enhancements.
Flix Entertainment remains financially strong and we are working through the execution growing pains. Over the past two years we’ve put together a truly impressive platform to support a guest value concept many third parties cite as the strongest in our sector. I’m enthusiastic about the future, and quite confident that the 2016 Flix Brewhouse story indeed will be subtitled The Force Awakens!
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Flix Ascendant
By: G. Matthew Silvers, Senior Vice President of Real Estate and Brand Development
Television writer and personality Andy Rooney once said, “[e]veryone wants to live on top of the mountain, but all the happiness and growth occurs while you’re climbing it.” I can think of no better way to summarize 2015, while looking ahead simultaneously to 2016.
This year was one of growth, bother literal and figurative. While we started 2015 with six auditoriums in one state and finished it with 25 in three, created a total of almost 500 new jobs, and grew revenue by a factor of 3x, it is the creation of a unique Flix culture and brand of which I am most proud. Yes, we have plenty of fantastic new real estate opportunities in the hopper which will further facilitate our climb. But what I'd prefer to emphasize is the ongoing learning, maturation and sense of camaraderie that has taken root and continues to grow at both our corporate offices and at the unit level that has become the norm. It has become equally important to us all that our employees enjoy working at Flix as much as our guests happily patronize it. In the end, Mr. Rooney was right. While the peak is a fine objective, it is the slope that underpins 99% of a company’s lifespan. We must embrace the climb. We must embrace the risk, periodic adversity and unforeseen pitfalls of the slope, because without them there is no professional, nor fiscal growth. On the subject of growth, I’d like to highlight some of the more noteworthy company "growth events" of 2015:
- Opening our first new prototype Flix Brewhouse in Des Moines, Iowa to welcome in the new year.
- Opening our second new prototype Flix Brewhouse in Carmel, Indiana in April.
- Cresting $16 million in total top line revenue for 2015, with a run rate that pushes $20 million.
- The expansion of our Round Rock facility by three additional screens and a corporate leaning center, in keeping with the prototype look at feel.
- Gaining national recognition for our beer program by winning a range of medals, including a silver medal at the Great American Beer Festival (remember folks, we are a movie theater winning medals at GABF)!
- Successfully reimagining and implementing a new menu that has raised the bar for cinema eateries in the popular-priced segment to new heights.
- Kicking off our new loyalty program called the circle, which after only a few weeks already has thousands of members.
- Started a new partnership with the largest movie ticket distributor, Fandango.
- Entered into a new Sysco foods agreement which has reduced our cost of goods significantly.
- Instituted a new in-house Flix Gift Card program that will dramatically increase revenue.
- Added serious talent at the Director and Officer level which will ultimately help us chart our path up the slope.
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These are all the hallmarks of a company that is growing, achieving and importantly, becoming happier by the day. Looking ahead, we will all continue to learn more about how to efficiently operate a logistically complicated business that is simultaneously expanding. We have an awful lot planned for the new year, not the least of which is a brand new learning program to ensure that employees are "on-boarded" effectively and that they grow professionally, including the ongoing development of our managers which is vital to the success of the company. This is quite possibly the most important “Flix-nitiative” in 2016. We will also undertake a moderate refresh of Flix unit number one here in Round Rock in an effort to make it look and feel overall more like our prototype and also modernize and upgrade certain operating aspects of the physical plant. Importantly, as a company we will continue our pursuit of becoming a Lean enterprise. The hard work will begin in the new year and we all know that without the pain of rebuilding ourselves pursuant to the Lean ethos, we will never maximize our potential to become efficient and highly profitable purveyors of happiness.
Perhaps the most important growth initiative of 2016 will be our pursuit of capital for continued company growth. With our new Albuquerque deal formally in development, I have begun to dialogue with at least ten different equity and debt sources and hope to find the right growth partner for Flix sometime in 2016. Success in this area will be pivotal to our continued ascent and will ensure that we will stay on track to generally meet our goal of 15 total units by 2020.
I have also been working diligently to ensure that the real estate pipeline remains full so that when our operations platform is ready for more and our coffers are full, we will be able to quickly pounce on our next round of deals. I am currently working through another deal in the upper Midwest, as well as a range of deals located throughout the central and southwestern regions of the United States. There is heightened interest in the Flix concept on the part of landlords and developers and it is my goal to seize this opportunity to create an enviable trove of real estate deals for Flix.
In closing, it is with great optimism and anticipation that we welcome in the new year. Onward and upward!
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The Power of the Circle
By: Greg Johnson, Director of Marketing
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As you've read already, this November marked with great anticipation, the introduction of our first company-wide loyalty program, "the circle." Although the program is still in its infancy, it is incredibly exciting to see the program take off so quickly.
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When we designed the circle, we wanted to take the best of hospitality and dining loyalty programs and introduce the boldest program the cinema industry has ever seen; and we believe we have succeeded. In working with Vista Entertainment Solutions (our point-of-sale partner) to craft and implement the program, they attempted to set our expectations regarding its prospective adoption rate. Loyalty programs within the cinema industry typically will see between 4-5% adoption within the first year. Of course, we had our sights set higher.
Our current Flix guest email list for all combined units hovers around 80,000 total guests. With just over one month of sign ups under our belts, we have nearly 9% of these guests signed up for the circle!
Of course the biggest question we are all asking is "now that we have these guests in a loyalty/membership program, what can we do with the data and the members to drive revenue"? One of the most powerful elements within our program that we are looking forward to leveraging is the advanced booking access that Hollywood provides on a limited basis to loyalty club members. For example, this past August, Universal Studios allowed exhibitors with a loyalty program the ability to show "Straight Outta Compton" a day before the national release to their loyalty guests, giving those exhibitors a jump on the competition with the exclusive shows.
As Flix is able to leverage these types of opportunities, as well as the other operational aspects of the program which we outlined in the Q3 newsletter, we anticipate participation in our program to continue to grow and along with it, brand affinity and increased revenues.
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In Pursuit of the Gold Standard
By: Mark McLaughlin, Vice President of Operations Support
Do you hear what I hear? Santa Claus is coming to town and he’ll be making his mad dash this year strapped to the back of the Millennium Falcon! The Christmas holidays are always a fantastic time of year but this year at Flix our stockings will be getting a little extra love from a galaxy far, far away. One of the main reasons I made the jump nearly a decade ago from traditional restaurant operations to the film world was my absolute passion for cinema. I spent so many hours with friends, family and now my children, sitting in dark theaters while enjoying the pleasure of getting lost in a story on the big screen. When the opportunity presented itself, it was the chance of a lifetime to make the jump at light speed in order to align my career with something I truly loved.
This year in particular is truly special as the most magical film franchise from my childhood reemerges. I can remember vividly standing in line just a few weeks after my 7th birthday on a warm May evening in our Nation’s Capital with my parents and younger brother waiting impatiently to get inside of the old Oxon Hill Twin Theatre. I was filled with excitement about seeing the original Star Wars and all of the amazing things that the galaxy far, far away had in store for us. Light saber swords, a princess in distress, space ships with laser cannons and loads of creatures, heroes and villains to capture the imagination. Never once back then did I think that one day I would have the chance to take my own 7-year-old son to that same galaxy again. It is a really amazing thing to see life come full circle in such a fun way.
Fun is what this is all about after all. Back in September when I was privileged enough to have joined Flix Brewhouse as its new Vice President of Operations Support, our CEO (Chief Enthusiasm Officer) made it quite clear that we were headed into the new millennium with an aggressive plan to expand the Flix concept. My charge was to bring my many years of dine-in theatre experience to the Flix team and immediately begin to develop manager development and staff learning programs, as well as undertake the development of a future modality of service and operations that would help Flix Brewhouse become the gold standard in dine-in cinema.
Over the past few months I have had the opportunity to visit with so many of our devoted team members and I have seen firsthand the dedication and love that they all have for the Flix brand. We have a core group of great people who are committed in ways that most outside of our industry would never understand. We all put in long hours, plan meticulously, engage hundreds of people daily and engage in a love affair with movies, food and beer that could be diagnosed by licensed professionals as a bit obsessive. What does that say about us? It clearly indicates that we have the potential to do anything we set our hearts and minds too.
Beginning in January, we will begin rolling out a new program designed to enhance the knowledge and ability of Flix managers to better and more efficiently execute daily operations. This program will greatly improve our managers’ financial acumen, as well as understanding of how to properly build the brand in order to deliver on the financial results that we all expect. To achieve this, we will be providing them with the tools needed for significantly increased productivity and efficiency. We will also be driving the highest level of professionalism at all levels, which will enhance Flix culture, making us the place to work or visit as we push on diligently towards our future state. Additionally, 2016 will see the introduction of a new hourly selection and learning program with fresh benchmarks, bells and whistles that will make the jobs of Flix Brewhouse team members far more efficient and flow more money to the bottom line. There are some amazing enhancements on the horizon for our brand and its future. I am looking forward to many more fabulous holidays and to putting on a show for our guests to create lasting memories. For now, to close out 2015 though, I want to say thank you to everyone for welcoming me to this awesome brand. It has been an incredible few months and I am excited about what is to come in the days and weeks ahead. May the Force Be with You All!
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A Year of Beer
By: Justin Rizza, Head Brewer
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2015 was an enormous year for Flix Brewhouse, both in measurable achievements that we can all look back on with pride, and in the planning to make our organization stronger and more accessible than ever. Our beer program has come quite a long way since our early days back in July 2011. Our core beers have grown stylistically and have also become strong revenue producers, gaining major acceptance with loyal craft beer fans revisiting our locations to quench their desire for their favorite Flix beer. While I have enjoyed ample artistic freedom and the opportunity to be creative, the time has come to tighten up the focus of our scalability and to focus on the Flix Brewhouse brand.
With the tremendous success of our beloved West Coast Gentleman IPA in Round Rock, Texas, we are proud to introduce a new Gentleman Series of beers within our core program. We have planned a Gentleman IPA series quarterly release schedule for 2016 including West Coast Gentleman, Half Gentleman (a low abv Session IPA that is easy to drink yet full of juicy hop flavor and aroma), Ladies and Gentleman (IPA with fresh Grapefruit added creating a refreshing, citrusy IPA) and Imperial Gentleman (a wintertime Double IPA with medium high body, luscious hop character and big 9% ABV). Here in Round Rock we have started producing more high gravity and malt-focused brews, including a super-rich Imperial Stout that is black as a moonless night, weighing in at 10.5% ABV, and a bourbon barrel-aged Belgian Quadruple Ale aged with black mission figs. Several of our more appreciated national seasonal releases will appear once again in the year to come. These include the quenching summer seasonals Flix Brewhouse Shandy and Round Rocker Lager, the malty, rich and complex Beer of the Dead as well as Oktoberfest in the autumn. Saison De Walt will reappear in spring and the powerful and much loved Kill Shot Scotch Ale next winter. We will also begin to put more effort into tying the cornerstone of our business (movies!) into the naming and releasing of some specialty beer offerings. This will include the tapping of a special cask-conditioned beer every quarter that will be specially crafted to tie into some of the more anticipated movie releases in 2016. New styles we will create this year include a wet hop ale, which will utilize freshly picked hops that have never been dried for storage, a black lager Dunkelweizen and a historic and refreshing German sour beer called Gose.
 This year we have also enjoyed some national recognition by being awarded a number of medals that demonstrate the excellence of our beer and capacity as a brewer. Our Carmel, Indiana brewer Chris Knott brought home a silver medal from the Great American Beer festival for his Generation Alt beer and a bronze for his Chillaxed Mild at FoBAB (Festival of Barrel Aged Beers) in Chicago.
Here in Round Rock we look ahead to eventually expanding our beer production by retiring our trusty little 3.5 barrel brewhouse and replacing it with the same 7 barrel unit we have in Carmel and Des Moines. We will also add a new 15 barrel fermenter and two 15 barrel serving tanks, as well as taking care of some much needed ongoing maintenance and production enhancement items, which will save quite a bit of time and labor.
As we look ahead to more new Flix Brewhouse locations, we continually challenge ourselves to improve all aspects of the brewing process, including the actual brew house itself and even training and execution, all with the purpose of bringing happiness to our guests. In 2016 the focus will be on continuing to consistently produce hand crafted ales and lagers of the highest quality while increasing our efficiency, communication and the transparency we all need to keep everyone from our CEO to our unit level members working cohesively to ensure that Flix Brewhouse continues to grow and succeed.
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Kill Shot Scotch Ale
By: Justin Rizza, Head Brewer
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 Kill Shot is our winter seasonal offering and is brewed to keep us warm and content. British Marris Otter malt imparts a rich flavor, contributing a slight nuttiness to the brew. British crystal malt adds caramel sweetness, body and a pleasant ruby red color. A dash of roasted barley deepens the color to burgundy and also brings balance to this strong, malty ale with a hint of roasted coffee character. Flaked oats are also added contributing body and a full and satisfying mouthfeel, as well as a rich, creamy head.
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